In short: The mechanism of his FICO short: Pulte's pilot let 21 lenders use it, then opened it to "all lenders," and "the most recent data indicates that Vantage Score had a 10% market share of new mortgage loans securitized and I expect that percentage will go much higher."
6:09I remain short FICO and think that its monopoly in mortgage scoring is going to break. The most recent data indicates that Vantage Score had a 10% market share of new mortgage loans securitized and I expect that percentage will go much higher. Bill Py is not done. He is now going after the mortgage insurance sector.
In short: FICO's competitor and the mechanism of his short: "Prior to last week, Vantage Score… was only available as a pilot program. Now, it is available to all lenders."
18:49For example, he said, "Over the last 5 years, FICO raised prices by something like 1,600%." This week, Pulte was back at it, criticizing FICO and the credit bureaus again. Prior to last week, Vantage Score, the competition for FICO, was only available as a pilot program. Now, it is available to all lenders. My view? I think FICO's monopoly is going to break and break badly, and I still like this short. Macy's reported.
In short: The named cause of FICO's 30% fall, with the regulatory catalyst specified: "A U.S. government housing agency (the FHFA) is now allowing a rival product, VantageScore 4.0, to be used for approving mortgages." The rebuttal is that it is additive rather than substitutive — "even if lenders start using VantageScore, they'll still check the FICO score too to make sure they get it right." Contrast the 21 May deep dive, which treated the same threat as sufficient reason not to own FICO.
In short: The named threat, and the reason the deep dive ends in a no: "Fair Isaac is facing more and more competition. Especially from Vantagescore." The AI angle is the sharp part — "AI could make it easier for VantageScore to become successful", i.e. the barrier is model-building capability and that barrier is falling. Listed among the risks in René's own conclusion too, alongside regulatory pressure. The regulatory catalyst behind it is set out in the 7 June issue: the FHFA now permits VantageScore 4.0 for mortgage approvals.
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